Kwasi Kwarteng who has since been replaced as Chancellor of the exchequer announced in the most recent mini budget that the 45% tax rate will remain in place moving forward.
Jeremy Hunt has replaced Mr Kwarteng who was in the role for less than six weeks and become the UK’s third finance minister in less than two months.
The 45% tax rate was previously removed in a previous mini budget arranged by former prime minister Liz Truss. It would have resulted in taxpayers with earnings of more than £150,000 paying less tax with a rate of 40% being used instead of 45%.
Around 660,000 higher earners would have benefited from the tax reduction if the proposal to stop the 45% tax rate hadn’t been reversed.
It wasn’t just the 45% tax rate that has been overturned in the most recent mini budget.
Income tax rate reversal
The basic rate of income tax was going to be reduced by 1p from 20% to 19% and introduced by 2024.
This idea has also been reversed and the basic rate of income tax will remain as is at 20%. To cut the basic rate of income tax would have cost the government in the region of £5.3bn in the 2023/2024 tax year.
Mr Hunt told the BBC’s Sunday with Laura Kuenssberg “Taxes are not going to go down as quickly as people thought and some taxes are going to go up,”
National insurance rates reversal
Since the start of the 2023/2024 tax year a 1.25% increase in national insurance contributions has taken effect. The NIC increase will be reversed from the 6th November 2022 with it benefitting around 28 million working people.
Corporation tax rates reversal
Corporation tax rates were due to increase from April 2023. The rates were due to increase from 19% to 25% with Liz Truss initially stating that this would not happen.
The decision has been reversed and the corporation tax rates will increase from 19% to 25% as originally planned from the new tax year.
Universal credit rules are changing
From 2023 people on low incomes will be required to increase the number of hours they work or potentially face having their benefits reduced. This change to universal credit could effect more than 100,000 people. You can find out more about the universal credit rule changes here.
More tax increases to come
More changes are expected from Rishi Sunak in the coming months as the government try to balance the books after the expense of Covid-19 and Brexit. Tax increases are one way to do this and we expect more news from the government sooner rather than later.
